Exxaro may shut or sell New Clydesdale

It said this was subject to consultation and engagement processes as stipulated and required in terms of the Labour Relations Act 66 of 1995 (LRA)‚ as amended‚ and the Mineral and Petroleum Resources Development Act 28 of 2002‚ as amended.

In November last year‚ Exxaro approved the potential sale of NCC through a tender process. The decision to sell NCC was made after Exxaro completed an internal review of its coal assets‚ from which it was established that NCC is no longer strategically aligned to the group's strategy.

The misalignment is mainly because NCC is a negative-margin operation with a shorter life-of-mine than expect. Exxaro's strategy has a focus on high-margin operations with longer life-of-mine operations.

Expressions of interest

Furthermore‚ Exxaro had also received a number of expressions of interest from parties with operations adjacent to NCC as well as other parties who indicated possible benefit from the use of NCC's infrastructure, which would extend NCC's life-of-mine.

"It is Exxaro's opinion that a third party may be better placed to extract optimal value from this asset. A divestment process started in April this year and interested parties were asked to submit expressions of interests.

"However‚ shortly thereafter‚ it became apparent that NCC's operations were under significant and unanticipated stress as revised forecasts for the operation indicated a substantial decrease in operating profit. The main contributors to the negative forecast are reduced coal prices and exchange rate movements along with mining difficulties, which are incurring increased mining costs at lower yields‚ and a shortfall of sales due to the characteristics of the NCC siding.

"The in-principle decision was taken to consider ceasingf production at NCC while in parallel allowing the tender process to proceed‚" Exxaro said.

"As Exxaro is contemplating stopping production at NCC‚ the group has informed the relevant trade unions in line with Section 189 of the LRA and a minimum 60-day consultation process is now underway‚" the group added.

NCC employs 402 people. In 2012 the mine produced 717kt of steam coal‚ primarily for the export market. Coal is mined using both open-pit and underground methods.